Hopkins v. Asset Acceptance LLC (In re Salgado–Nava)

• Decision Date: 25 July 2012
• Docket Number: Bankruptcy No. 09–41646.,BAP No. ID–11–1389–MkHJu.
• Citation: 2012 Daily Journal D.A.R. 10249,12 Cal. Daily Op. Serv. 9152,473 B.R. 911
• Parties: In re Andy N. SALGADO–NAVA, Debtor. R. Sam Hopkins, Chapter 7 Trustee, Appellant, v. Asset Acceptance LLC; Recovery Management Systems Corp.; Bonneville Billing & Collections; NCO Portfolio Management; Eastern Idaho RMC; Sprint Nextel Correspondence; American Infosource LP, Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

473 B.R. 911

12 Cal. Daily Op. Serv. 9152

2012 Daily Journal D.A.R. 10,249

In re Andy N. SALGADO–NAVA, Debtor.R. Sam Hopkins, Chapter 7 Trustee, Appellant,

v.Asset Acceptance LLC; Recovery Management Systems Corp.; Bonneville Billing & Collections; NCO Portfolio Management; Eastern Idaho RMC; Sprint Nextel Correspondence; American Infosource LP, Appellees.^*

BAP No. ID–11–1389–MkHJu.

Bankruptcy No. 09–41646.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Argued and Submitted on June 14, 2012.

Decided July 25, 2012.

Monte Gray of the Gray Law Offices, PLLC argued for appellantR. Sam Hopkins, chapter 7trustee; Ronald R. Peterson of Jenner & Block LLP argued for amici curiaeJeremy Gugino and the National Association of Bankruptcy Trustees; Cameron M. Gulden argued for amicus curiae the Office of the United States Trustee.

Before: MARKELL, HOLLOWELL and JURY, Bankruptcy Judges.

OPINION

MARKELL, Bankruptcy Judge.

INTRODUCTION

R. Sam Hopkins(“Hopkins”) sought $1,315.41 in fees for his service as a chapter 7¹ bankruptcy trustee.He based his request on the trustee compensation rates set forth in § 326(a).The bankruptcy court, however, found that the reasonable value of his services only amounted to $750 and limited Hopkins's fees to that amount.

We REVERSE the bankruptcy court's fee award and REMAND with instructions to enter a fee award of $1,315.41, the full amount Hopkins requested.

FACTS

Andy N. Salgado–Nava(“Salgado–Nava”) commenced his voluntary chapter 7 bankruptcy case by filing his bankruptcy petition on October 22, 2009.Hopkins was then appointed to serve as trustee for Salgado–Nava's chapter 7 bankruptcy estate.

Hopkins initially determined that there were no non-exempt assets to distribute to creditors.He thus categorized Salgado–Nava's case, in line with most chapter 7cases, as a no-asset case.²Hopkins had reached his decision after performing a number of tasks, including reviewing Salgado's schedules, his statement of financial affairs, his tax returns, and his responses to Hopkins's examination questions at the first meeting of creditors held pursuant to § 341(a).Because of Hopkins's no-asset determination, creditors and other parties in interest were told in January 2010 not to file proofs of claim in the case.SeeRule 2002(e).Hopkins's only income expectation was a small $60 fee.³

But Hopkins had also sent routine notices to various taxing authorities, including the State of Idaho.These notices told of Salgado–Nava's bankruptcy filing.They also requested that the recipients advise Hopkins of any tax refunds owed to Salgado–Nava, as Hopkins claimed that such refunds were property of the bankruptcy estate under § 541.

These notices brought results.As it turned out, Salgado–Nava had overpaid his state taxes for 2009 and 2010 by approximately $10,000.In compliance with the notices, Idaho sent Hopkins Salgado–Nava's tax refunds.Hopkins then withdrew his no-asset report.He also issued a new notice advising creditors that there might be a distribution of assets and directing them to file proofs of claim in order to share in that distribution.Seven creditors, appellees here, did so.

After Hopkins received the tax refunds, Salgado–Nava amended his bankruptcy schedules to list the tax refunds as assets and to claim $4,160 of his 2009 refund as exempt.No one contested Salgado–Nava's exemption claim.As a consequence, the exemption was deemed allowed pursuant to § 522( l ) and Rule 4003(b).Part of his 2010 refund also was excluded from the estate.⁴

When all was said and done, Hopkins collected $11,099 in assets.He paid $5,445 to Salgado–Nava in respect of his allowed exemptions, which left $5,654 available to pay creditor dividends and Hopkins's chapter 7trustee fees and expenses.Based on the trustee compensation rates set forth in § 326(a),⁵ Hopkins filed a request in March 2011, along with his Final Report, asking the bankruptcy court to award him fees in the amount of $1,315.41, plus actual expenses of $46.10.⁶

Before hearing the matter, the bankruptcy court requested Hopkins provide additional information.Specifically, the court requested Hopkins file:

a sworn affidavit in support of his requested compensation and expenses which includes an itemization setting for[th] the date and time spent providing all services rendered by Trustee for which he seeks compensation, together with a narrative discussion or explanation of any other information he wishes the Court to consider in support of his application.

Order to Trustee to File Supplementation of Record(April 12, 2011)at p. 1.

In response, Hopkins filed a one-page document entitled “Supplement to TrusteeFee Application,” which provided a brief narrative summary of the services that Hopkins had provided in the bankruptcy case.It also summarized the results of those services: Hopkins had cash on hand which he estimated would be sufficient, after the payment of his requested trustee's fees, to pay $4,292 to unsecured creditors who had filed proofs of claim.This would result in a 39% dividend to creditors.

The Trustee also filed time records detailing the amount of time and services he and his staff had performed in the bankruptcy case.According to Hopkins, he and his staff spent approximately 14 hours on the case: Hopkins personally spent 3 hours, his bankruptcy administrator spent 6 hours, his office clerk spent 1 hour, and his paralegals accounted for the final 4 hours.

After the hearing, the bankruptcy court issued a memorandum decision awarding Hopkins only $750 of the $1,315.41 in fees requested.Relying on In re B & B Autotransfusion Servs., Inc.,443 B.R. 543(Bankr.D.Idaho2011), and on the other cases cited in B & B,the court held that $750 was a reasonable fee for Hopkins's services.According to the court, based on its consideration of the extent and difficulty of the services Hopkins and his paralegals had provided, the requested fees were unreasonable.In making this determination, the court reasoned:

The only assets requiring administration by Trustee in this case were Debtor's tax refunds.Trustee has not shown that any significant efforts on his part were required to secure the refunds from Debtor; apparently, Debtor surrenderedthem to Trustee promptly.Beyond accepting and holding the tax refunds, Trustee was required to perform only routine, simple administrative tasks in this case.While all of those services are compensable (i.e., actual and necessary), they required no special skills or expertise, and required no significant amounts of time to complete.Indeed, most of those services were not performed personally by Trustee at all, but, instead, were provided by Trustee's support staff of “paralegals” and others....When the Court focuses upon only those services of Trustee and his paralegals, and assigns appropriate reasonable value to those services, the requested fee is not a reasonable one.

Mem. Dec.(June 23, 2011)at pp. 3–4(footnote omitted).

In addition, the bankruptcy court rejected Hopkins's argument that, under § 330(a)(7), he should receive $1,315.41 in fees as a commission based on the compensation rates set forth in § 326(a).As the court put it, § 326(a) in essence “caps”trustee compensation but does not alter or limit the court's duty and authority to determine a reasonable fee.

On June 30, 2011, the bankruptcy court entered its order approving Hopkins's Final Report and awarding Hopkins $750 in fees and $46.10 in expenses.The Trustee timely filed a notice of appeal on July 13, 2011, which gave us jurisdiction under 28 U.S.C. § 158(b).

DISCUSSION

A.Standard of Review

Although this Panel reviews a bankruptcy court's fee award pursuant to § 330(a) for abuse of discretion, Ferrette & Slater v. U.S. Trustee(In re Garcia),335 B.R. 717, 723(9th Cir. BAP2005), we still must “determine de novo whether the [bankruptcy] court identified the correct legal rule to apply to the relief requested.”United States v. Hinkson,585 F.3d 1247, 1262(9th Cir.2009)(en banc).And that is the issue here: what is the “correct legal rule” set forth in § 330(a)(7)?

B.Interpreting § 330(a)(7)

We start with the paragraph's provenance.Congress added § 330(a)(7) when it adopted § 407 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109–8, § 407,119 Stat. 23, 106 (2005)(“BAPCPA”).To determine what this new paragraph means and what it added, we begin with the text of the statute itself.Ransom v. FIA Card Servs., N.A., ––– U.S. ––––, 131 S.Ct. 716, 723–24, 178 L.Ed.2d 603(2011)(quotingUnited States v. Ron Pair Enters., Inc.,489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290(1989)).

Section 330 (a)(7) provides:

In determining the amount of reasonable compensation to be awarded to a trustee, the court shall treat such compensation as a commission, based on section 326.

Somewhat surprisingly, the published decisions construing this paragraph conclude that it added little to the law of trustee compensation.These decisions rest primarily on the view that trustee compensation is always subject to a review for reasonableness.See, e.g., In re B & B Autotransfusion Servs., Inc.,443 B.R. 543, 550(Bankr.D.Idaho2011);In re Healy,440 B.R. 834, 835–36(Bankr.D.Idaho2010);In re Ward,418 B.R. 667, 675–78(W.D.Pa.2009);In re Coyote Ranch Contractors, LLC,400 B.R. 84, 94–95(Bankr.N.D.Tex.2009);In re McKinney,383 B.R. 490, 493–94(Bankr.N.D.Cal.2008);In re Phillips,392 B.R. 378, 389–90(Bankr.N.D.Ill.2008)In re Mack Props., Inc.,381 B.R. 793, 799(Bankr.M.D.Fla.2007);In re Clemens,349 B.R. 725, 729–31(Bankr.D.Utah2006).

There is, however, an alternate view of § 330(a)(7).This view, adopted by the Office of the United States Trustee,⁷ focuses on § 330(a)(7)'s terms—particularly the use of the term “commission”—which seem to alter the court's role in reviewing trustee compensation.SeeKenneth N. Klee & Brendt C. Butler, The Bankruptcy Abuse...